Richard Lloyd

Consequential court decisions in FRAND licensing cases are still relatively few and far between. This year there has been the judgment out of London’s High Court in Unwired Planet v Huawei and before that there was, among others, the 2015 decision in Huawei v ZTE from the Court of Justice of the European Union.

Now, a dispute between Ericsson and Chinese phone manufacturer TCL in the Central District of California could be about to be added to the canon.

The case was filed by TCL in 2014 when it alleged that Ericsson was in breach of its FRAND obligations following negotiations between the two sides over a licence to the Swedish telco’s standard essential patents (SEPs) for 2G, 3G and 4G mobile technology. It was part of a worldwide dispute between the two companies which has also seen Ericsson bringing several patent infringement lawsuits against TCL in a number of jurisdictions (many of which are now on hold).

In its original complaint TCL revealed that it was seeking: “A judicial accounting on what constitutes a FRAND royalty rate in all respects consistent with Ericsson’s promises to license its patents identified as (or alleged to be) “essential” to the 2G, 3G and 4G standards.” That is why the case has piqued the interest of many in the patent-owning community – a ruling from the court could provide guidance on the royalty rates for one of the two or three leading SEP portfolios in the mobile world, so giving a much wider benchmark against which all SEP licence deals in the space might be negotiated.

The bench trial took place in early February (you can see a good overview of it here) and then, perhaps as an indication of the complexity of the case, presiding judge Selna took until early November to reach a decision. TCL and Ericsson were given a few weeks to make redactions to the ruling before it would be made public, a deadline which was subsequently extended on two separate occasions after requests from the Swedish company.  The ruling is now due to be published in mid-December, giving either side extra time to push for a confidential settlement before it comes out.   

To add a further layer of complexity to the situation, a trial for patent infringement brought by Ericsson against TCL in the Eastern District of Texas - which was not put on hold as the California case proceeded - was due to start yesterday. That might mean that Ericsson has been looking to buy as much time as possible so that the Texas case can at least get underway and potentially give it some extra leverage in any settlement negotiations with TCL.

A decision in the FRAND case would be the first major SEP ruling since Mr Justice Birss’s judgment in Unwired Planet v Huawei, which was largely welcomed by patent owners. The reaction in the US in many quarters was positive — former Chief Judge for the Federal Circuit Paul Michel told this blog that it was “the decision of the decade” in SEP FRAND licensing — although it has not proved popular with some American judges. Judge Robart, who issued one of the leading FRAND SEP decisions in the US in Microsoft v Motorola Mobility, was particularly critical at the Intellectual Property Owners Association annual meeting in September and claimed that he didn’t think it would have much impact in American courtrooms.    

The patent community should broadly welcome anything that adds a greater level of transparency to SEP licensing. But should the decision from Judge Selna come down against Ericsson, then it would widen the gulf between US and European courts meaning that SEP licensing disputes might simply become a race to the courtroom between patent owners pursuing actions in London or on the continent, and defendants seeking breach of contract suits in the US. That would hardly help a market that still badly needs greater stability and predictability.